Human Capital & Careers

CFO, More Execs Charged Over Backdating

The former CFO and two other executives of Comverse Technology are charged with fraud for allegedly backdating options. Similar charges were brough...
Stephen TaubAugust 9, 2006

Federal prosecutors have charged the former chief financial officer and two other former top executives at Comverse Technology Inc. with fraud in connection with an investigation into alleged backdating of stock options.

The Comverse executives are the second group to be charged in the options backdating scandal. Last month, Federal prosecutors and regulators filed criminal and civil fraud charges against three Brocade Communications Systems executives, including Gregory Reyes, the former CEO.

In today’s action, former Comverse finance chief David Kreinberg, former Chief Executive Officer Jacob “Kobi” Alexander and William Sorin, a former general counsel, were accused of backdating “millions of stock options” at the world’s largest maker of voice-mail software, according to Bloomberg.

The government accused Kreinberg and Alexander of creating a “slush fund” where they parked stock options later used to recruit or retain employees, according to the wire service.

According to the report, Alexander, an Israeli citizen, was accused by prosecutors of wiring $60 million to Israel from proceeds of fraudulent stock options.

The three individuals were charged with conspiracy to commit securities fraud, mail fraud and wire fraud.

In addition, the Securities and Exchange Commission filed civil charges against the three men, accusing them of engaging in a “fraudulent scheme” to grant themselves and others backdated options from 1991 through 2001, according to Bloomberg.

The complaint reportedly asserts that “These executives were able to conceal from investors that the company was not recording material compensation expenses” and was overstating Comverse earnings. These executives collectively realized millions of dollars in illicit compensation through the exercise of illegally backdated grants.”

The three executives resigned about three months ago in the wake of an internal investigation into the timing of certain stock option grants.

In April, the company said it would restate earnings for the five years ended January 2005 and the first three quarters of the current fiscal year after a Special Committee found that the actual dates of measurement for certain past stock option grants for accounting purposes differed from the recorded grant dates for such awards.

Paul Baker, a spokesman for Comverse, told Bloomberg, “the company continues to fully cooperate with the SEC and the DOJ.”